61: Portfolio Reviews & Client Successes

Welcome to win the Women Investing Network, the podcast where you can learn from successful entrepreneurs, business leaders and real estate investors who are winning in business and life. Learning from others is the fastest way to grow your skills, gain knowledge and avoid pitfalls so you can win. Join our hosts, Elizabeth Embry and Jason Hartman. Elizabeth. Elizabeth is a seasoned real estate investor, experienced corporate executive and skilled mentor. Jason is a self made multi millionaire investor, entrepreneur and highly acclaimed thought leader. Together with their successful guests, you'll get the tools you'll need to win.

Thanks for joining us. I've got our investment counselor, Sarah, who you've heard on the show many times over the years. Over the last 12 years. We want to talk about some things going on the market, congratulate some of our clients who are just doing awesome things in the investing world and kind of go from there. Sarah, welcome back.

Hey Jason, thanks for having me back.

Give us your kind of pulse on the market. There's a lot of talk about, you know, when will the next recession hit? And it will hit, it will be here, folks. So we're going to help you be ready for it. You know, people are, they're kind of wondering what is coming next.

I've been wondering a little bit myself, but to be honest, the only time I hear about a recession is when I listen to your podcast or when I turn on the news.

I'm Mr. Negative.

People are pretty upbeat. I think everybody's excited that interest rates have once again dropped a little bit. This is really allowing new clients to get into the game and our existing clients to restructure some of their debt and their portfolio. I've been doing a lot of portfolio reviews with our clients to see where we can do a cash out refinance and roll into more properties. Sometimes you've had a property for several years, the rates go down a little bit, you can stretch out that term of the loan, pull cash out and.

Increase the cash flow a lot.

Good stuff, good stuff. So that's the refi till you die plan. You can also just renegotiate your interest rate with your lender and potentially get non refi interest rate reduction. Yes, that is really happening, folks. It is really happening. So don't be afraid to ask. Especially if that loan is a portfolio loan with your lender and they have not sold it off many times because they know if you refinance, you're probably gone. You'll probably go to a broker that could broker your loan to any one of a whole number of lenders and they're probably going to lose you. That's a customer retention strategy that they may just lower your rate without a refi. Now, it won't help you get cash out. If you want cash out, you gotta refinance. But that is another option, another strategy to consider. So the portfolio makeover. I'm really glad you're doing a lot of those lately, Sarah listeners. That's something you should be doing with your investment counselor every single year. And if you don't have an investment counselor, if you're not working with us yet again, it's free. You know, we earn our income when you buy properties with our referring affiliates. Okay. That we refer you to. That's how we get paid. So our advice is free. Just take advantage of it. Get free consultations. Have Sarah or other investment counselors help you restructure your debt, help you make the best plan, move assets around, reallocate, rebalance your portfolio, if you will, and any other things you want to share, like some examples, Sarah, of any clients that have been doing that specifically with you.

He's in Southern California. He's been working with us for many years. Basically what I did is I sent him a blank spreadsheet for him to. And it's pretty brief. He just filled out some very basic information that I needed. You know, property address, the estimated value, and then I calculated, you know, what his equity was and his rent to value ratio. And sometimes it makes sense to sell a property, and sometimes it just makes sense, makes sense to do the refinance. You know, we did the review. We found some places where he could pull some cash out and lower his payment, lowers interest rate rather. And we just got him in touch with one of our lenders and we do have some lenders that can lend in all 50 states. So if you're looking to cash out in two different properties that are in different states, you can do that with one lender simultaneously. So the lenders really do make it easy. Now he's working on his identification into a new market, looking at some new construction, and yeah, we're really excited. Should be improving his cash flow pretty nicely.

The other thing you can do is you may want to do the refi and pull cash out on your primary residence. And many of you listening live in expensive markets, the west coast, the Northeast, South Florida, or anywhere around the world for that matter. You can refinance that property and that can be a really good source of equity for remember, you still have essentially the same amount of equity. You've just diversified it more into other properties and other markets.

Yeah. And the only thing I would caution with that on your primary residence and the lender will stop you from over leveraging. Right. They're going to require you to keep some equity. Usually they require you to keep about 25% of your equity in the property. But just be careful not to over leverage. At the end of the day you still have to make that mortgage payment on your primary residence. And so when you pull cash out, your payment will go up.

And so nowadays you don't really even need to give that warning because the bank isn't going to allow it.

Before the Great Recession when they were being really silly and stupid, then you have to give that warning. Maybe. But right now the banks have become so conservative that not too much to worry about. But yeah, go ahead.

And one common question I get around that is should I do a refinance on a 30 year fixed rate loan or, or should I just put a HELOC in place? HELOC is a home equity line of credit. And the answer is, you know, it really depends. It depends what your existing interest rate. If you've got a really low good interest rate on your primary residence, it might make sense to just keep that in place and do the line of credit. But you know, if you can get about the same interest rate that you already have and then you can lock in a new 30 year fixed rate loan, that's probably the route to go today because the rates are still pretty low. And the home equity equity line of credit usually is a 10 year loan and then you know, it can adjust and you don't have that 30 years locked in. So if you can refinance your entire loan and improve your position, then I think that's the way to go. What are your thoughts on that, Jason?

Yeah, well, I agree. If you can reduce your risk by having a little more leverage, which doesn't make you a target for a creditor for a foreclosure, if things really go down the tubes again like they did during the Great Recession, that higher loan balance actually offers protection. And I've talked about it many times over the last 15 years. I know it's counterintuitive. If you're new listener, you're probably not going to get it. But you know, listen to the old shows. It's been talked about many times. Just go to jasonhartman.com and search. The best insurance is a high loan balance. Okay. If you search that, you'll find our episodes on that where we have taken a very detailed look into that and that's A good plan. And Sarah, you also alluded to, although you didn't mention it specifically, the portfolio makeovers where you're helping clients do 1031 tax deferred exchanges. A great vehicle income property is the most tax favored asset class in America and taxes are the single largest expense in anybody's lives. I have done many, many 1031 exchanges myself. I'm in one now. But there may actually be a couple of options that are better. Yes, I really said that better than a 1031 tax deferred exchange. I have been geeking out, taking a deep, deep. I mean, anybody who knows me knows that I have a little bit of ocd, okay? A little bit obsessive compulsive when I get intrigued by something. Man, I just chased that to the end of the earth. And, and this is one of the things I've been doing. I've spent hours and hours reading, learning, watching videos, consulting with people, financial advisors, lawyers, law firms, exchange accommodators on.

Well, what is it?

Well, I'm not going to tell you. I'm going to tease you, okay, because here's the deal. I'm going to talk about this. Profits in paradise, okay? It's. It needs really a whole episode or a couple of episodes just to go through it. Okay. Just like a 1031 exchange would. I mean, you know, we do entire episodes on 1031 exchanges and there's still more to know. Okay, so I'm going to talk about it. Profits in Paradise. But it is a way that you can potentially relinquish properties, sell properties, or a business. And it's not the opportunity zone. I want to just say that I think the opportunity zone, as you've heard me on past episodes, is totally overhyped. I think it's overrated. You know, there's a few small number of people that it fits and makes sense for. I'm not saying. I'm not saying it's completely invalid. I just think it's completely overhyped is all. There's all these promoters out there making tons of money. Essentially. It's a bait and switch in a lot of ways. For most people, it's just no big deal.

Okay, well, I remember Jason. Years ago, there was the Go zone.

Now, the Go zone was a great deal. That was phenomenal.

It was a great deal. However, I purchased a property that was initially in the go zone and then they redesignated the lines and I lost that deduction. So you can research anything that you're doing and make sure you know about it.

There's another. Was another flaw with the gozone besides that one. Okay. And by the way, just so you know, even though they redrew some of the lines or there were misunderstandings and misinterpretations about them, a lot of people still took that deduction and got away with it. Okay. So I'll just put that out there. But here was the thing that happened with the gozone. Now, this was years ago. And again, past episodes are up there of the podcast. You can find them@jason hartman.com just use the search engine there to search gozone. But here was really the problem with the gozone is that tax incentives like that, and it's happening with the opportunity Zone too, they distort markets. They really cause a lot of distortion. And almost immediately after the gozone tax incentive began, the money just rushed into these certain markets and the properties became overvalued so quickly. We recommended it at the beginning and it was a great deal. I bought a whole bunch of those gozone properties myself. I just loved the tax benefit. It was phenomenal. But after a while, all these promoters were still out there promoting this stuff. And I'm like looking at these deals, saying, it's crap. These deals are just not good. I remember I got into arguments with some people. They said, well, you know, we want to bring your property, our properties, to your network and have you promote them and stuff, and we'll pay you. And I'm like, I'm not promoting this junk.

I remember. Yeah, I remember there was one group, and I don't even remember who it was.

Hathaway maybe.

I don't know. But it was. It was a group, I want to say it was like, in Biloxi, Mississippi, and they wanted to promote their stuff. And the properties look kind of junky or janky. I don't know. They didn't look great. And for whatever reason, our gut said not to work with that group. And they ended up getting into some, like, legal trouble. They ended up being a bad apple. So you do, you know, when these opportunities come up, you really do have to just keep in mind the deal has to make sense without the opportunity.

Exactly. Without the tax benefit.

Without the tax benefit.

Right, right. Don't let the tail wag the dog. The deal must make economic sense by itself without any special model leaseback or subsidized rental income or tax benefit or anything. It needs to just make sense by itself. And then if you get these extra benefits, it's icing on the cake.

One of the clients, I'm Working with, on an exchange. You know, everybody's on everybody's email list. Right. And so there was somebody used to work with years ago, we don't work with anymore, and he was on their list. There was a model leaseback opportunity, which is just a brand new construction home.

I saw that. Yeah. Listen, listeners, I want to tell you something. When we stop working with someone, there's a reason, okay? So if you want the updated information, you better talk with your investment counselor. You need to be talking with us.

Because, because you worked with them five years ago. That doesn't mean the deals that they have today are so good. And just. I'll just make this quick, but basically what happened was that this seller sent out a performa with like $2,600 in rent, which is what the builder is going to pay for two years, which.

Is not the market rent and not the market.

Right, the market rent. And he, he had an appraisal and the appraiser said that the market rent was about 2,100. That's a $500 a month difference.

Ridiculous. Yeah, ridiculous. It's, it's totally overstated. Here's what these scumb, these weasels, what they do is they guarantee the rent back. And not all of them do it, but sometimes it's a ploy. They guarantee that rent back through some different LLC or corporation and then they just don't honor it. And what are you going to do? Sue them? It's such a small amount of money, it's not worth suing them. That's the problem. Our legal system is such a disaster, you know, that it just doesn't make economic sense to actually hold anybody accountable, sadly. And even if you do sue them, it's just this entity that's like this entity with little to no assets. So they're just going to bankrupt it.

Yeah. So check back in with us. You know, before you put a property under contract, check with us, let us run it through our pro forma and make sure that the deal actually makes sense.

And Sarah, I heard your dog Teagan in the background, and I think Tegan agrees. Teagan agrees with that. Talk to your Investment Counselor through Jasonardman.com we'll have a phone consultation with you and go over all that stuff. Okay, so we got off on this Go zone, Tangent Opportunity Zone. It's not. You're going to love this, folks. If you're selling stocks, properties, a business, any of these highly appreciated assets, we really have a couple of vehicles that can help you. You're going to hear about it at Profits in paradise. Register at Jason Hartman live. That's Jason hartmanlive.com and we're going to have the property tour the day before. I'm really excited about that. I just think this is going to be a great event. It's not a big event. Now some of you have complained, hey, listen, we'd like to have huge events, right, for our own self interest. But you guys love the small to mid size events. You know, you get more attention, you know, frankly, and it's not as crazy. So this is one of those events. It was, you know, when we held it last year in Hawaii, it was a small, moderate group and it was nice. I think we had, you know, 60 people, give or take. And so it's not crazy. It's not, you know, 200, it's not 300 people. I think you'll enjoy it. So be sure to register for that. And we're combining it with a property tour the day before. So that'll be fun. You can actually see properties and purchase them the day before the event.

I'm really excited for the tour. As I've mentioned before, I'm bringing my son Jordan. He's 13. This will be his first property tour and conference and he's really into real estate. So I'm really excited for it. I'm excited to hear your new talks and hear what you're learning about and what you're into. You're always into something new.

Yep, I'm trying to be. I'm trying to be. You know, real estate is a very slow changing industry. That's why there's no TV station like CNBC dedicated to real estate. Because there, there just wouldn't be enough to talk about 24 7, right versus stocks. You know, they're up, they're down, it's a roller coaster. You know, the insiders are stealing all your money. There's always a story, right? Right. But that's not the case with income property because it's just a really stable, true, good asset class. So that's what you want. Sarah, did you want to talk any more about any of your clients that have purchased or closed on properties recently and what they're up to?

I am working on a pretty good sized 1031 exchange with our client Jim, also from Southern California. He just ident rights and properties and people don't do this. And Jason, you did this too. You called me last Friday or Saturday.

And said, sarah, I'm getting scolded here about something. What is she gonna say?

You called Me? You voxed me. Oh, I was at a wedding. This was a few weeks ago. I was at my brother's wedding.

Oh, yes, I know. I did that to you myself.

Yeah. And I'm like in some garden with no reception out in Temecula, like in the middle.

Well, they don't know what you're gonna say. What did I do? Scold me.

Yeah, yeah. So he's like, I gotta identify my 1031 Exchange properties by tomorrow. Can you find me some properties.

At this wedding? Like texting everybody, emailing everybody, trying to get you some properties.

And, and thank you, you came through, by the way. You. I got a bunch of them. Yeah. You know, sometimes I feel like the shoemaker with no shoes. You know, I'm too busy helping other people to help myself, so.

Well, so our client Jim did the same thing to me last weekend. And I was surprised. He, he didn't seem stressed about it at all. But we've been talking, you know, working together closely, we've been looking at some deals. Nothing quite. He really wanted multifamily. And it's hard to find like good deals in multifamily. So we found a few that he didn't really like. And I'm like, Jim, you've got like three days, we gotta find you some properties. Like, let's look at some single family. So, you know, sure enough, at the last minute I found him a 10 unit deal. And very rare and hard to find that deal. But he literally identified his property the day before. So don't, don't be like Jim and Jason, okay? Get it started early. You got 45 days from the time you close to identify your property. So call me early, let me know when you're getting ready to sell your property so that I can be on the look for you.

Yeah. Now, just so you know, listeners, what Sarah is referring to is that when you do a 1031 tax deferred exchange and you sell the properties, you have 45 days to identify, identify what's called the upleg property, the properties you're buying the property or properties you're buying to replace what you've relinquished. And then you have 180 days to close on them. But in 45 days you have to identify them. And that identification has to be timestamped either by a postmark or any. You know, nowadays it's usually an email, right? So I had to email my exchange accommodator Saturday at midnight. This time Sarah's talking about a couple weeks ago, I did have some properties already. Lined up, you know, I was ready. I wasn't as unprepared as you're making me out to be, but I just wanted to see if there were any better deals. That's why I asked you. So thanks, Sarah, for helping me out with that. I appreciate it. But. Yes, do not wait to the last minute. For sure. How about some other clients or what's the vibe? What are they asking? You know, what are, what are the client's feeling? Just this sort of anecdotal stuff I think is good for people to hear. We present a lot of empirical data on the show, but just this, you know, the conversation. The vibe is important too.

Yeah, I mean, the conversation I'm really having with people is just do your due diligence, make sure you don't skip your inspections. You know, I like properties that are like A or B class. And I know we've talked about that a million times. Some people still go after the cheaper properties and it's fine. I mean, you can buy a couple of those cheaper properties, but just make sure your overall portfolio is, you know, in good areas. I like that bread and butter rental property. You know, that Little rock property that's 115,000 and rents for, you know, 1100amonth and said three bedroom, two bath, you know, just maybe a 1500 square foot house. Just a basic rental property. And so that's what I'm working really hard on, sourcing for our clients in addition to the new construction, which I love. So you want to have a diverse portfolio, have a few different types of properties and not just different markets, but different classes and rent ranges.

Good stuff. All right, great. Anything else you want to share with clients as we wrap it up?

No, just I really urge you to come to Profits in Paradise. I will be there. I look forward to meeting with a lot of you. I'm excited for the tour the day before. If you have questions about anything, give us a call. We're happy to answer. And yeah, we look forward to seeing you in just a few short weeks.

Right. And by the way, you know, we always talk about websites and everything, but if you want to just pick up the phone and reach out to any of our investment counselors and our team members, you can just call 1-800-HARTMAN. That's 1-800-HARTMAN for our international people. It's probably better to just go through the website, but our regular line is 714-820-4210 because the 800 number doesn't work outside of the country. We'll look forward to seeing you at Profits in Paradise and talking with you soon. Until then, happy investing.

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